Farmers' Union Mut. Protective Ass'n of Colorado v. San Luis State Bank

• Decision Date: 30 September 1929
• Docket Number: 12056.
• Citation: 86 Colo. 293,281 P. 366
• Parties: FARMERS' UNION MUT. PROTECTIVE ASS'N OF COLORADO v. SAN LUIS STATE BANK.
• Court: Colorado Supreme Court

281 P. 366

86 Colo. 293

FARMERS' UNION MUT. PROTECTIVE ASS'N OF COLORADO v. SAN LUIS STATE BANK.

No. 12056.

Supreme Court of Colorado

September 30, 1929

Error to District Court, Costilla County; J. C. Wiley, Judge.

Action by the San Luis State Bank against the Farmers' Union Mutual Protective Association of Colorado. Judgment for plaintiff, and defendant brings error.

Affirmed.

Gabriel, Mills & Mills, of Denver, for plaintiff in error.

Ralph L. Carr, of Denver, and J. H. Thomas, of Antonito, for defendant in error.

ALTER J.

This action was brought in the district court by the San Luis State Bank, a banking corporation, assignee of one E. E Brown, to recover on an insurance policy issued by the Farmers' Union Mutual Protective Association, a corporation, indemnifying Brown against loss by fire or lightning. The parties will herein be referred to as plaintiff and defendant, as those respective positions were occupied by them in the court below. The defendant, at the conclusion of the evidence, moved for a directed verdict in its favor, and the plaintiff made a similar motion, and thereupon the court discharged the jury, and rendered judgment in favor of the plaintiff in the sum of $2,415.50 to review which this writ is prosecuted.

The defendant relies upon three assignments of error: (1) That the policy was void because of a violation of a provision thereof against additional insurance; (2) that at the time of the loss the assignor of the plaintiff had no insurable interest; and (3) that the judgment was excessive.

The evidence discloses that on April 7, 1924, the defendant issued its 'certificate of insurance,' by which the property of the plaintiff's assignor was insured against loss by fire or lightning in the sum of $5,000; in the application upon which the certificate was issued, the insured set forth that his property was incumbered by a deed of trust to secure the payment of a $6,000 indebtedness; no provision in the policy was made for the payment to the cestui que trust in case of loss by fire or lightning; Brown the insured and assignor of the plaintiff, had failed to comply with the provisions of his deed of trust, and as a result thereof, on September 2, 1924, the property described in the deed of trust, of which the property insured was a part, was sold by the public trustee, and his certificate of purchase issued therefor; on May 7, 1925, a large portion of the property was totally destroyed by fire, and the defendant refused to pay the loss. Some time prior October 8, 1924, and subsequent to September 2, 1924, the cestui que trust advised the insured that she had the buildings upon the incumbered premises heavily insured, and in reply to this the insured advised that her policy was void because she had no insurable interest until after June 2, 1925, the date on which the public trustee's deed might issue to her; this advice, according to the insured, came from an attorney. After the fire, and on May 5, 1926, the insured assigned his rights under the policy to the plaintiff, and the cestui que trust assigned, on June 6, 1925, all her rights in the certificate of purchase of September 2, 1924, and also all her rights in the insurance policy which she had effected upon the incumbered premises, to the plaintiff. The insurance company, under the policy issued to the cestui que trust, settled its loss in a manner agreeable to the plaintiff, and that company has no interest in this litigation.

1. Defendant's policy contains, inter alia, the following provision:

'In consideration of thirty and no/100 dollars, as contingent and expense fees, and the requirements, limitations and conditions hereinafter contained, or contained in the application, the articles of incorporation and by-laws now in force, or hereinafter adopted by said company, which are attached to and are a part and parcel of this policy. * * *'

The by-laws attached to the policy were approved on March 16, 1922, and among them we find the following:

'Sec. 16. Applicants for insurance shall notify the company of all incumbrances and of all insurance held by other companies upon the property insured. In default of such notice, policy of this association shall be void.'

We understand it to be the contention of the defendant that these by-laws were amended and the amendment thereto approved April 11, 1924, and by reason of a provision of the policy itself, even though adopted after its issuance, became part and parcel thereof. Amended section 16 reads:

'Sec. 16. Applicants for insurance shall fully state the title and condition of and all incumbrances and insurance upon the property to be insured. A failure to make such statement shall make the policy issued by this association void.

'When a member of this association takes out additional insurance with another insurance company and does not notify the state secretary of this association in writing of such additional insurance, and secure the concurrence of this association in the said insurance, the policy of this association shall be void and the association's liability shall cease from the date of such additional insurance.'

We do not understand the contention of the defendant to be that the insured directly violated the provisions of section 16, just quoted, by taking out additional insurance in another company, but that the cestui que trust, in securing a policy upon these premises, did so by reason of the provisions of the deed of trust authorizing her so to do, and in procuring insurance the cestui que trust was agent of the insured, and therefore the provisions were violated, and the policy upon which this action is brought is void, and judgment should be in favor of the defendant.

The particular provision of the deed of trust under which this contention is made reads as follows:

'And the said parties of the first part will in due season pay all taxes and assessments on said premises, and, at the request of the legal holder of said note, will keep all buildings that may at any time be on said premises, during the continuation of said indebtedness, insured in such company or companies as the holder of said note may, from time to time direct, for such sum or sums as such company or companies will insure for, not to exceed the amount of such indebtedness, except at the option of said parties of the first part, and will assign and deliver the policy or policies of insurance to the beneficiary hereunder, as further security for the indebtedness aforesaid. And in case of the refusal or neglect of said parties of the first part or either of them to thus insure, or assign and deliver the policies of insurance, * * * then the holder of said note * * * may procure such insurance, * * * and all moneys thus paid, with interest thereon at 10 per cent. per annum, shall become so much additional indebtedness. * * *'

The peculiar phraseology of the above-quoted section of the deed of trust would enable us to dispose of this assignment by saying that, inasmuch as the defendant, under this defense, offered no evidence to establish a request by the cestui que trust for the insurance, and the assignment thereof as additional security for the indebtedness, there was neither refusal nor neglect on the part of the insured to procure insurance or assign the policy. The quoted portion of the deed of trust makes the action of the party of the first part, respecting insurance and assignment of policies, dependent entirely upon the 'request of the legal holder of the note.' In the absence of a request by the legal holder of the notes, the party of the first part was not obliged to either insure or assign. We might well assume that the holder of the note was entirely satisfied with his security, and neither required nor desired any additional by way of insurance. Under the terms and conditions of the deed of trust, the cestui que trust, after a request that the trustor should procure insurance and assign the policy to her as additional security for her indebtedness, and the trustor's refusal or neglect to do so, might procure insurance upon the incumbered premises, and charge the expenses thereof to the trustor, but until the refusal to procure and/or the failure to assign, the deed of trust itself conferred no authority upon the cestui que trust to obtain insurance. If the cestui que trust, under the circumstances just mentioned, obtained insurance, it was not by any authority under the deed of trust, and she certainly did not become the agent of the trustor in so doing.

We will assume that the amendment to section 16, supra, adopted on April 11, 1924, had the same force and effect upon this policy of insurance as if it had been attached to the policy. This section contains a direct prohibition against additional insurance by the member without the consent of the defendant. The defendant contends that such a provision in a fire insurance policy is valid, and has been so held in the case of National Mutual Fire Ins. Co. v. Duncan, 44 Colo. 472, 482, 98 P. 634, 638, 20 L.R.A. (N. S.) 340, wherein we said: 'The requirement in a policy that other insurance covering the same property must be assented to in writing and endorsed on the policy is valid. * * *'

It should be observed, however, that his particular language used by the court was in construing the following provision of the policy then under consideration: 'This entire policy, unless otherwise provided by agreement endorsed hereon or added hereto, shall be void if the insured now has, or shall hereafter make or procure any other contract of insurance, whether valid or not, on the property covered in whole or in part by this policy.'

It was held that this provision of the policy was not violated by an application for insurance,...